Scaling Car Washes

Scaling Car Washes Episode image with M&A Expert Jeff Pavone

10: Scaling and Selling Advice for Car Wash Owners with M&A Expert Jeff Pavone

Are you planning today to set up your car wash business so that you can successfully scale or sell in the future? The decisions you make today can have a profound impact on what your business is worth in the future. Do not miss this episode that is jam-packed with excellent scaling and selling advice from mergers & acquisitions expert Jeff Pavone of Amplify Car Wash Advisors. JT and Jeff dig into important plans you can make in your business right now to ensure that you’re setting yourself and your business up for future success. Jeff helps you know which pitfalls to avoid and which investments to consider early on to ensure future success!

When you look at the kind of values that people are getting today for car wash, your time as an owner is better spent on building your company. And that company is making sure that the branding is right, that you’ve got the right team members. Your job is to make sure you’ve got somebody sitting at that pay station, so you’ve got the right manager, the right General Manager. You’re going to spend more time out looking for future locations and development sites. But you’re building a business now; you’re not running a car wash. And again, you’ve got to separate the two if you’re really going to get a lift on it! ”

~Jeff Pavone

Don’t miss out on this episode where JT and Jeff talk about how to set up your car wash business today to ensure that you’ll have long term success with scaling and selling your business in the future!

Want to get in touch with Jeff? Visit the Amplify Car Wash Advisors website, AmplifyWash.com, call 602-757-1514, or email him directly at jeff@amplifywash.com.

A Little More about Jeff Pavone

Jeff Pavone is a leading advisor to the car wash industry, successfully completing more than $1 billion in car wash-related transactions. A lifelong entrepreneur, Mr. Pavone is the owner of Commercial Plus Group and Amplify Car Wash Advisors. Under his leadership, Commercial Plus quickly scaled to a market leader at the forefront of M&A advisory, real estate brokerage, and financing for the car wash industry, completing complex transactions for some of the most well-known and widely respected car wash chains in the country. Leveraging his longstanding relationships with owners and operators, Mr. Pavone partnered with car wash veteran Bill Martin in early 2020 to launch Amplify Car Wash Advisors, which builds off the Commercial Plus foundation to address the evolving needs of car wash owners and operators.

Outside of providing advisory services on a nationwide scale, Mr. Pavone is also a real estate investor. Prior to Commercial Plus, he was the Co-Founder of Law.com and Founder of Medical.com and National Law Resource.

Interested in the episode but don’t have time to listen right now? See the full interview below!

JT 0:01
Welcome to Scaling Car Washes. I’m your host, JT Thompson. I built my first car wash in 2002. And since then I’ve been involved at every level of the carwash ownership experience. I’ve built and sold my own car washes, and as a Sonny’s distributor, I’ve helped other owners build and operate their car washes. Along the way, I’ve been a multi-unit restaurant owner with 23 units in five states. We’ll talk to experts in the carwash industry and related industries that can share insight information that will help you build, scale, and ultimately exit your multi-unit carwash platform.

Welcome everybody. This is JT Thompson. I’m your host of Scaling Car Washes podcast. I am here today with Jeff Pavone. He is the CEO and founder of Amplify Advisory Services. They specialize in car wash… really just a lot of things. They work with people on selling their business, buying businesses; they also work on helping people through the actual operations. They have people on staff; so, Jeff is just an expert. He deals… Everybody in this business knows Jeff. So, I’m super excited to have him on here today. Jeff, how you doing?

Jeff 1:11
I’m doing well. Thank you! Thank you for having me!

JT 1:13
So, Jeff, give us a little bit of your background. How did you get into the car wash business?

Jeff 1:17
I got into it by buying some car washes.

JT 1:20
Like the rest of us!

Jeff 1:22
Like the rest of us, and then the brokers that added so little value. I’ve been in it for about 20 years really. If you look at the Phoenix market, you’re going to see some of the largest carwash chains in the country. And I have the pleasure of saying we’ve been involved with these chains for probably a good 15 plus years. And we’ve really brought in investment banking services to these carwash owners and really helped them focus on growing their business and getting to the next level.

JT 1:49
So why the car wash… How did you get into the car wash business? Just curious! People always are wondering, like, you know, what’s the story here?

Jeff 1:56
20 years ago, I sold my company. And, like a lot of guys, I’m fascinated by like cars. And the next thing I know, I’m partners in a couple car washes. It turned out the partner wasn’t the partner I thought it was getting. I needed something to do. And I said, you know, whatever that broker did, I can do, and probably better! Because we wanted to buy some businesses. So, we literally started up a brokerage company 20 years ago, and have been having a blast ever since!

JT 2:21
It is a great industry. You know, one of the things I love about this industry is just, you know, salt of the earth people! And I know as you’ve been in this, you’ve introduced me to some different people that I just have a lot of respect for. And as you’ve kind of gotten into this business, right, it’s really matured, and really kind of taken a direction that I could have never foreseen 6, 7, 8 years ago, and then the way you look at it today. So how people manage and run their business is very different. And one of the things that I want to kind of drill down and just get your insight on is, and share some of your expertise… Part of this, the thesis of this podcast is somebody who’s got two or three units, four units, maybe even one, but they want… They know that they’ve got a vision, they want to build their business, they want to scale their business, some of them, you know, ultimately, everybody’s got or needs to have an exit plan. Right? So how do they build their business today, so that on the backside of it, in however many years, they’ve set themselves up to maximize the value of their business? And this is what you do, right? This is this is a fastball down the middle for you. But I know it’s a complicated question in terms of there’s a lot of different aspects to it, but give us some, you know, some different thoughts on what’s a great operator that maybe has 10 or 12 units, that you can say, these guys do this.

Jeff 3:46
So great question! Because we’ve seen a lot of call them Mom & Pop guys that built 1, 2, 3 locations, and they have value X. And then I’ve watched other guys that built up, you know, handful locations and get X Plus Plus. And they just knocked that out of the park! And I’ve got to tell you, you know, one of the real important things to look at is, whatever you’re doing, you’ve got to build it, like you’re going to scale it. So if you’ve got a brand, and you’re doing a great job, you got to start putting a playbook together, and then a team together, like you’re going to scale. And if you can do that… I mean, when you look at an exit, the most attractive thing to a buyer is going to be a scalable company. So, I don’t care if you have five or 10 or 20 locations; you can hit another park with five as long as your manual, your maintenance schedules, your marketing… Everything you need to do, you need to think big, and you need to think like you’re going to replicate it in more units. It increases the value tremendously.

JT 4:45
Great point. So you’re saying that the little things that… A lot of times these are… Most people have an employee manual, and have some of these different tools, but you’re saying that a lot of those things actually add value on the backside, so make some investment today to really kind of put some more thought and effort into it. Is that right?

Jeff 5:03
For sure! I mean, what you have to understand is private equity groups really aren’t buying real estate. Okay? So they’re buying a business, they’re buying a cashflow. They’re buying a company. And so, anything you can do to make your car wash look more like a business… And I think that’s the mistake a lot of guys haven’t actually figured it out yet. But this is a business and a cash flow that they’re buying, not a piece of real estate.

JT 5:25
It’s a great point. And one of the things that we talk about frequently on this podcast is the team. At what point is it a good idea for somebody to invest — maybe a little early — to get the right people? And does that pay off?

Jeff 5:39
The first thing you need to do is you need to decide: so, where do you want to be here in the next 3, 4, 5 years? And if you’re doing this with the intent that eventually there’ll be a sale, the sooner, the better… The cost of building a carwash today, as you know, keeps going up, right? It used to be 3 million, 4 million, 5 million, now it’s approaching 6 million. And as that cost goes up, it’s critical to make sure that you start looking at the team — your first, second, third locations — that can drive volume. When you’ve got that kind of investment, and it is fairly cheap to have somebody who can help drive marketing and social media… And I would start looking at putting a team together. As soon as you start getting your second and third location, putting in that corporate team, and making it not about just you as the owner. So, when you’re building this business… you get too many owners that want to wear every hat. That’s hard to buy and hard to scale.

JT 6:27
It’s hard! And that’s kind of as they migrate from a Mom & Pop to a real business, a real scalable business, you have to look at the… The owners have a hard time — and listen, I’m a former owner, so I absolutely know this — you think, “I can do that. Or I can do that. I’m not going to pay this for that. I can do this myself.” And that is a fallacy that a lot of people fall into, and it costs money on the backside, right?

Jeff 6:52
For sure.

JT 6:53
So, in terms of… As these folks are looking to scale their business, obviously capitalization is a big one. And… are there any pitfalls? So as you… If somebody calls you, and they have 10 units, right? And they want to sell these units? Does the capitalization… Are there any pitfalls that they need to avoid? Not going into? Is there like a hairball that you can help somebody avoid?

Jeff 7:17
I’ll tell you the biggest thing that seems to come up on a lot of these deals, and it’s partners! And what starts out a friendly partner or investor… Having a clear path to be able to sell! And it’s like with their operating agreement… So, everything you do when you’re starting your company… Many of you are going to take investors in. It pays to get a good lawyer who’s going to make sure you’re papered up properly. So you do have the right to go sell the company without seeking five guys signing off on a deal, because everybody’s going to have a different place in their life. Some people may not want to sell. That minority investor that holds 20% may be the guy that screws up your deal, because he’s not looking to sell. So, you’ve got to make sure you get the right professionals up front that are giving you guidance; otherwise, you’re going to have a problem. And I can tell you, it happens more than not! And a lot of these partners or investors are friends, family members… And so, don’t think just because they’re close to you, that they’re going to go along with whatever you say and do; you really need to make sure it’s in writing.

JT 8:25
That is an excellent point. I’ve seen that happen multiple times. So this all gets kind of vetted out in the operating agreement, right? And you touched on this: veto rights, right? So making sure that early on, if you do bring in a partner, that you are closely monitoring, or your lawyer is making sure that somebody with a small percentage doesn’t have the veto rights to slow down or kill your deal.

Jeff 8:52
So I would say that’s one big one. I would say, of all our deals, when we run into a problem, that’s number one. Because it’s hard to fix that sometimes!

JT 9:02
Well, the problem is, a lot of times to fix it, you have to give up more money. I’ve seen that. Right? So, you’re the guy… So, you put all this together; somebody came in, and they have 20% of the company. But on an exit, they don’t want to exit so they know they have some hold up power. Now all of the sudden, you’re giving up an extra 5% in order to get them to go along with the deal.

Jeff 9:22
Definitely! And again, there’s a lot of even choosing your financial partners wisely. There are a lot of guys that partner with developers, and next thing they know, they realize, man, I’m doing all the work. Next thing I know, they’re slowing my growth down; they won’t let me add locations. Next thing, you’ve got to… you’re selling the company that you don’t want to sell! So, it’s how much power do you want to give your call it development partner… You’ve got to think really clear about that. Because coming into it, it looks really sexy and exciting that you got somebody that’s going to let you build some more locations. But you’ve got to make sure you know what you’re getting in bed with, because at the end of the day, it could be that they only want to grow so fast. You want to grow faster. And the next thing you know, you’re selling the company, and you don’t want to!

JT 10:05
And it’s Christmas for everybody when you’re first talking about it, right? They’re excited, you’re excited! And so, you’re obviously thinking, Oh, they’ll never do that, or no, they… We’re looking at this the same way. But at the end of the day, you’re saying, Jeff, that when it comes time to sell, all of the sudden, the motivations can be much different than they were 2, 3, 4 years ago when they came in on the deal. So, a good lawyer is going to help them make sure that you don’t get into that tarpit.

Jeff 10:36
I would say, get a good lawyer. And then the other thing that’s really what we overlooked is I would meet with more than one person. So, what we really try to help our clients do is… let’s say they do want to bring in a minority partner, or some kind of partner, to help them grow. We always think it’s a great idea to meet with three or four or five different groups. Because it didn’t they you got to make sure that culture and that fit is really good. And I can tell you, a lot of people make decisions with the first group that they meet with, because they’re just telling everything they want to hear, and it looks great. But how do you know if it’s the best deal out there unless you meet with multiple groups? So we really highly recommend at least getting introduced to several groups, and saying, who really might be the best fit?

JT 11:25
So if I’m an owner, and I’ve got three units. How do I find those people? You know, so what’s a bit of advice that you can give somebody? Obviously, call you. That’s one of them. What’s some other things that people could do to find some different groups? Right? Because it’s tough!

Jeff 11:41
So yeah, I would say that they are out there, but there is a bit of a skill in trying to navigate through what a good partner looks like, and how to find them! And it’s not trying for us to have somebody call us. They can call any professional, but the terms of the agreements are so across the board different. And so you’ve got to know what you’re negotiating with. So, yeah, I would say, reach out to professionals — maybe your CPA, maybe your lawyer — but you know, they’re going to have some level of experience. But go find yourself a professional that really can bring you multiple groups and help you understand the difference in negotiating the terms. Because I’ve got to tell you, most of these groups are better at negotiating terms than you are, because they negotiate terms for a living!

JT 12:26
That’s a great point!

Jeff 12:27
And the operators… you’re pretty good at washing cars! And unless you’re doing this thing for a living, I can tell you, they’re going to lay out terms that best meet their needs, and may not meet your needs. And how would you know what’s negotiable unless you’ve done it a few times. That would be a big plus!

The other thing JT, in a lot of things we find is, if you’re an owner… Back in the day, car washing was a Mom & Pop Business, and you ran it like your own business, right? And, you ran your dry cleaning through it. You’re getting that little cash coming out here, and you’re peeling off some cash. Well, today, if you’re able to sell your car washes for 10 to 15 times your cash flow, it starts to become important to run a good clean set of books. It will get somebody a lift on a sale price when there’s good clean books. Not to say there’s not ways to get around doing add backs and looking at some of this cash, but but it doesn’t… It’s not as favorable as having a really good set of clean books.

JT 13:25
When you say clean, let’s unpack that a little bit. Because I’ve had this conversation with some other people. And obviously, you have the advantage of seeing hundreds of sets of books and understand. So when you say clean, are you talking about… Like when you say like dry cleaning, right? Not running their personal expenses, and the vehicle through it, and paying for meals for themselves… What does clean mean?

Jeff 13:50
I think you can still continue to do some of that, as long as you’re well documented of what those add backs are. For the most part, the buyers are sophisticated. They’re going to know that if you have… Let’s say, you’re doing your personal auto insurance through the company, then they’re going to look at that and say, as long as the car’s not running your business, and you want to add it back, they’re going to let you have that add back. I’d say the key is having well documented expenses, so when we do sit down, we can walk them through it, and you’ll get credit for those add backs.

JT 14:22
Yeah, because it’s hard, right? You know, most people set these LLCs up and they… they’re pass through, and they’re using this to offset their personal tax exposure, which… Because their business is entwined with their lives. And so, a lot of that is owned by the business, which I totally get. So, maybe how they set their books up is makes it easier for them to kind of keep them clean, right? Anything else… When you say clean books? What else? Like reconciling? I mean, year end closes. I mean, what else would you say?

Jeff 14:55
So, really, what we really look for is books that can tie, right? You’re going to have your financial statements that are going to tie to your sales reports. Everybody’s going to look at your GSRs. They really want to make sure that everything just ties. If they’ve got to work too hard at it, then there are potentially problems. But I would say, just even good, solid QuickBooks… What you’ve got to go in this thing knowing is that when there is a transaction happening, you’re going to be handing off your QuickBooks to the other side doing diligence.

Almost every deal that gets done today is going to do a Quality of Earnings. Okay? So for our audience that doesn’t know what a Quality of Earnings is, that’s going to be a third party accounting firm that’s going to go through and, if we show that you’re doing a million dollars in business, they’re going to go through and spot check your sales reports, they’re going to look at your bank statements, they’re going to go look at your vendors that you’re paying. But they’re going to do a Quality of Earnings just to make sure that what you’re telling somebody is true. So, this isn’t about somebody taking your word for it anymore. And they do it because most of the private equity groups, they’ve got a fiduciary to their investors, that they’re going to do a certain level of diligence. So they’re going to take a higher standard than an individual who’s going to be coming in buying your business, because they’re really doing it for themselves.

JT 16:13
So on a Quality of Earnings, that’s going to entail a QuickBooks account, that’s going to entail getting their… maybe their bank statements, and then their sales record, the GSRs out of DRV or Sonny’s or CRS or whatever point of sale system that they’re using. Anything in there… So again, as you are doing deals… Landmines that people run into? Anything in that process that they can do, besides, keep your books clean. That makes it…

Jeff 16:40
So, let’s say we say there’s an add back of $50,000. They may spot check to see that, yeah, there’s really an add back, right? That expense really exists. They may go all the way back to the invoice, or look for it, to make sure that it was really there. So they… what a third party is going to do is not really just take your word for it. They’re going to validate it with some kind of checks and balance. And it could be… If we’ve gotten, we’re showing $100,000 in chemical costs, they may go and spot check and make sure invoices have been paid on those chemicals.

JT 17:10
So in terms of an add back, right? Most people don’t know what add backs are. I mean, that’s kind of a technical term, but it’s really something that should not be counted as part of the operations of the business, right? And so there’s no reason to reduce your earnings that you’re going to get a multiple on, so you add it back, so it doesn’t hurt you. Talk about one time expenses. Are all one time expenses… If you look at capex… I’ve got to replace some big piece of equipment, which is a $30,000 wrap, or something along those lines. Is that considered an add back?

Jeff 17:52
Yes, great question. A lot of owners love writing all their equipment off in their expense category, so they get that write-off that year. And I would say that what we do is we will go through and look at all the costs. And if we see something like a $30,000 new blower or whatever, that should have been capital, we’ll just move it into a different category and put an add back. Really common stuff. Part of it is having somebody on your side that’s credible enough to represent these add backs. So the buyer is going to say, “We’re okay with that add back.”

JT 18:31
So maybe even just in your books, making notes on things that are one time expenses… So, that’s a piece of advice that somebody can take away from this is if I know I’ve got one time expenses, note that, and make that obvious in their books, so that later down the road, if they ever needed to go back and look at it, they could separate that out.

Jeff 18:51
Great idea. Just make it… At the end of the day, if we can make it clean and make it easy for the guys on the other side, it’s going to go a long way, and they’ll ask a lot less questions.

JT 19:03
So we talked a little bit about partnerships, and that’s what you would call an equity partner, somebody that’s coming in, and they’re taking a percentage of the company in order to put capital in. Talk a little bit about debt financing. Should somebody early on be bringing in an equity partner or a debt partner?

Jeff 19:23
There’s lots of ways to finance growth, right? And I would say the obvious one is a lot of guys starting out will go get an SBA loan. You can get a 7A, which is fairly easy one, which lends on enterprise value. Or you get a 504 SBA loan, which will end on your real estate side.

JT 19:43
And people need to be careful because those both have different prepayment penalties.

Jeff 19:47
Completely different.

JT 19:49
Yeah, 504 is a little more complicated where it decrements down you based off of time. And then I think 704 is another time based one, but it’s… I think it’s a little more aggressive. Is that right?

Jeff 19:59
It’s probably a little more expensive. It’s really meant for somebody, they really are buying something, and they need to finance blue sky, they can’t with that, because it couldn’t lend on beyond real estate. A little different animal. And the 504… You know, there’s a lot of things you can do, and I would say, consult your local SBA expert. But they do have caps and limits on what you can borrow, but if you’re building something that’s energy efficient, they’ll waive that, and you can get more 504 financing. And banks love it! I mean, at the end of the day, they’re going to have some more protection, the rates are going to be fixed; they’re great. Not a bad way to go! Then you really have your community banks. And I would say, you know, most guys that are looking to grow that first 10 locations, they’re probably using that community lender. And again, it’s okay if you have two or three banks! They may not all want that much exposure. So they may… As you grow, you may have to use two or three, and they’re happy to do it.

JT 21:01
Is there anything… So, let me stop you there. Is there anything, as somebody who’s going to get debt financing, that they need to be aware of? Obviously, a prepayment penalty. Are there any other things that you’ve seen that they should be like, hey, make sure you do this, or ask this, or set it up this way? Any any piece of advice you can share?

Jeff 21:18
I mean, the big one, obviously, is personal guarantees! You want to get a at least, at a minimum, them to release that if there’s a sale, there are no penalties, right? So you can have… Everything you do is negotiable! So, even when you’re getting your financing, if I’m getting my conventional loan, I’m taking it out to three banks and letting them compete on rate and terms! Because they will! Everything’s negotiable! So I would absolutely do that, then you’ve got to look at your amortization schedules, and depending on what you can live with…

JT 21:50
What are you seeing out there right now?

Jeff 21:51
You know, you can… 20 years is pretty average. There are guys doing 25, some 25 year loans. I would say, it ranges from 15, 20, to 25, 20 being probably the most common. Typically, your term is going to get fixed for five years; you could get a five year fixed, but a term of 10 years, where it just resets in another five years, is not not a bad way to go! And we’re looking at rates… Rates right now, conventional loans, are still at an all time low. And we’re finding well qualified people getting loans in the threes to, you know, a decent loan, that would be in the low fours. So we’re still pretty… Rates are still really, really competitive. So you’ve got SBA loans, you’ve got conventional loans… Another way of people financing growth is setting up something where they bring in private investors. And they pay them… Let’s say you need a million dollars of equity to go into your next carwash, and you’re tired of pulling that money out of your own account, and or you’re starting to get tapped out. You know, one way is bring in private investors. You pay them like an 8% kind of coupon on that equity, and maybe they would own 25 or 30% of equity going into that project, and you keep the rest.

JT 23:05
How is that different than a partner?

Jeff 23:07
It’s because they’re investors. So you really control the deal at all times. They’re not involved at all outside of they get their their check for their investment, they’ll get a report on maybe how your business is performing. And then when there’s an exit, they’re already agreeing on that they’re going to be dragged along. So, a partner becomes a little more interested in your business, I would say than… These guys are purely investors!.

JT 23:38
And you talked about drag along… Drag along rights are… Talk a little bit about that, because that’s a term that’s important for people.

Jeff 23:45
You want to make sure that no matter who’s putting money into a deal, that you have the right to drag them along, to follow through with that deal in the the terms. They have no rights telling you what the deal terms are going to be. They’re basically just a party to that…

JT 23:51
They’re along for the ride. That’s why I wanted to stop you.

Jeff 24:04
They’re on for that ride. That’s right! And so, that’s why you’ve got to make sure that, if you’re looking to build something that’s going to grow, and eventually exit, spend a little bit of money upfront, get a good a good lawyer, make sure this stuff is dealt right. Again, even with family and friends, there’s still those pain in the butts when you get down to the end of it, when there’s money at stake.

JT 24:26
Yeah, I think also, if you’re looking to go get some investors, don’t wait until the time you’re getting investors to make sure your books are in good order. Spend some money — if you have to get a fractional CFO or controller to come in and help kind of clean your books up — because the last thing you want to do is go to an investor with books that are a mess, because also that’s going to… That’s can be an indicator of what they can expect from you. So you want to make sure you’re prepared.

Jeff 24:52
Absolutely! I mean, again, I would say when we look at this business, it was Mom & Pop business forever!

JT 24:59
Yeah.

Jeff 25:00
Right? And in the last five, six years ago, you know, this is becoming big business! You know, we’re… I’m watching guys that built carwash chains that started with a few that are now worth several 100 million dollars. And you got to think of how do you get there? And I would say, I would be looking at my business. And again, you’ve got one carwash; that could be worth $10 or $15 million! You need to treat it like it’s a serious business! And I would say, having a good books and record, and start really looking at your team, that it’s well organized, and that it’s just not you doing all the work. But it becomes really an exciting opportunity to grow wealth fairly quick. As long as you look at it like a real business, and not just owning a neighborhood car wash!

JT 25:48
If somebody comes to you and they’ve got a deal, and they have washes that are leased… They did a ground lease, and then they went in and built, or they did a reverse build to suit… Is that something that, on an exit, that could hurt them, and they should avoid that? Or is there like… it doesn’t matter. If you’ve got a great opportunity to lease a piece of property, and you can get your build and your equipment all financed, then you should go for it. What do you think?

Jeff 26:15
I would tell you if you’re… We’ve got markets that are almost impossible to buy dirt in. You look at California, you look at the northeast, and you got to go in some of these markets… It’s really hard to get a quality piece of land for sale. And so if your only option is a ground lease, I would do it all day long! I think you’ve got to make sure you’re getting enough term on it. I mean, I’d love to see 50 years on these ground leases! Get enough term on it. But at the end of the day, our buyers are buying cash flow, not real estate! So you can definitely get a ground lease your multiple may be a little less because you’re not owning real estate. But it’ll ding you slightly, not a lot. There are a lot of people that are that are looking at sale leasebacks of carwashes. And my only my only suggestion there is because if you’re looking to get to scale and really big 30, 40 locations, sale leasebacks are not a bad way to go. But if you’ve got just a handful of car washes, it just becomes pretty expensive to do a sale leaseback when you can still get good quality, conventional lending for significantly less, and I would say with a leaseback, you’re going to have rent… Call it at seven, seven and a half may be?When you can go borrow money at four, you know? That spread is pretty good. And it makes it attractive for a buyer to come in, and buy your operation. And let them flip the real estate at a better cap rate. It’s going to get you a better return now. But I would never walk away from our really high quality location because you can’t own a dirt!

JT 27:50
All things being equal, keep the dirt, but if if that’s not an option, you’re saying, then, by all means, do not hesitate to lease.

Jeff 27:57
I’m a huge fan of building out my own network of carwashes. So let’s say you’re building out a brand in your market, and the only way to expand is with a ground lease, by all means, you’ve got to do it!

JT 28:10
So as these folks are trying to move from a Mom & Pop, you know, to this kind of corporate… More of a legitimate real business that has real value… You talked about this a little early on, and I want to kind of circle back to it. You know, the entrepreneur, the owner, and their involvement… Businesses that can stand alone without the owner, I always feel like are more valuable, right? Because the owner is not going to go with the business. And at the end of the day, most investors don’t want to deal with an owner. They want to buy the business, run it however they run it, and then the the owner that just made a lot of money, can go and sip Mai Thais or do whatever. So, talk a little bit about kind of setting your business up for success.

Jeff 28:55
The day when the owner was the guy sitting there in the tunnel, you know, waving curse through is probably, I would say, the old days, right? I mean, at the end of the day, people did that.

JT 29:07
I did that. I remember on a day somebody didn’t show up, I had to go load cars, right? So, I mean…

Jeff 29:13
Yeah, but when you look at the kind of values that people are getting today for car wash, your time as an owner is better spent on building your company. And that company is making sure the branding is right, you’ve got the right team members. Your job is to make sure you’ve got somebody sitting at that pay station, so you’ve got the right manager, the right General Manager. You’re going to spend more time out looking for future locations and development sites. But you’re you’re building a business now; you’re not running a car wash. And again, you’ve got to separate the two if you’re really going to get a lift on it! Because when somebody looks to acquire you eventually they’re going to look and say, “Wow, I’ve got this guy who is working this carwash for 80 hours a week! How am I ever going to step in and manage it?” They’ve got to make sure that there’s a team that is transferable to the new owners, and the new guy is going to say, “All we’ve got to do is just plug this thing into our own network of carwashes, and it’ll keep running! And we’re going to accelerate it with more money.” But again, if you’ve got an owner that is involved in every detail of that wash, it become far less attractive.

JT 30:14
Great point! Okay… And I think that’s important for people to know, is one of the most important things that they can do early on, is to start building the business to operate without them! That if they went… I think you and I were talking about this before. They should be able to go on vacation for a month, and the business does not miss a lick. Right? I mean, how… So, as you’re walking potential buyers into some of these sales, how do they ferret that out? How do they… So how do they know, when they’re looking at the business, that the owner isn’t keeping the whole thing together? And that they actually have a…?

Jeff 30:50
I’ll tell you one of the easiest ways. Look at how they’re getting compensated and how they’re compensating. The really successful, high volume sites that we have pay a lot for a good manager, a good district manager. They pay their people well because they’re driving great volume and getting results! I would say a less effective owner is the guy that’s looking to pay minimum wage, and do everything himself. And he’s going to make money through keeping your expenses low. I’ve got to tell you, that’s the guy that’s going to be far less attractive than a guy who was paying his team really, really well, but he’s driving great numbers on his operations and making money from operations!

JT 31:33
Great, great point. Well, listen, Jeff, this has all been super fascinating. Most people, I think as they’re kind of getting into this, they’re looking at all aspects of their business, obviously… How they structure it, the partnerships, the capitalization, the operations are all things that they’ve got to think about today, in order for — whether they go to sell their business, whether they want to pass it on to their kids, but at some point, everybody has to have an exit, right? They’ve got to be prepared today. So, I really appreciate all of your insight. Tell us a little bit about Amplify. How can somebody get a hold of you if they have any questions? What’s the best way to talk to you?

Jeff 32:09
So Amplify Car Wash Advisors was really born out… As we got in this business 20 years ago, as a broker, we realized that our clients were becoming big business. I mean, an unbelievable amount of fortunes are being made in the car wash business. And so about five or six years ago, we really upped our game, and we brought in investment banking in house. So we’ve got investment banking, we’ve got analysts, financial people, to really help our clients get to the next level. But we also, about two years ago, Bill Martin and I partnered up to start Amplify, because we realized that at the end of the day, if we could drive more value in operations, for every dollar, we can add to the bottom line, it can be worth 10 to $15. We really expanded; we’re at full service. We will help somebody really maximize the value of their business, we will help them understand their options… Because not everybody wants to sell. I mean, some people do. And if they do want to sell, we’ll run it. We run a competitive process. But we’re really there to… We’re long term relationship driven. We’ll work with you for years sometimes, to get you the right point. When you’re ready, you’re ready. And so, the easiest way to get a hold of us is going to be Jeff@amplifywash.com, or feel free to call it 602-757-1514.

JT 33:29
Awesome. Well, Jeff, thank you so much. I’m JT Thompson. I’m your host of Scaling Car Washes podcast. That was Jeff Pavone of Amplify Car Wash Advisors. Thank you so much, everybody! Come back and listen to us. We will always distribute a new episode on the first and third Tuesday of every month. Follow us, give us a review. Thank you so much. Take care everyone. Thanks for listening to today’s episode of the Scaling Car Washes podcast. Please subscribe to stay current with all of our episodes coming up. Thanks, and I’m JT Thompson, your host.

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